Financial statements at the level the request calls for.
When a bank, a surety, or a partner asks for financial statements from a CPA firm, the request names a level, or it should. We work at three of them under the AICPA Statements on Standards for Accounting and Review Services (SSARS): preparation, compilation, and review. The firm’s principal CPA signs compilation and review reports. We do not perform audits. When a requester requires one, that work goes to a separate firm. Lenders and sureties: see how release works.
Three levels. Only one carries assurance.
Preparation
We prepare your financial statements with no report. Each page is marked that no assurance is provided. It fits owners who read their own numbers and requesters who accept CPA-prepared statements. Independence is not required, and you can keep your own books.
Compilation
We compile your financial statements from the information you provide and issue a compilation report. We are not required to verify the information or gather evidence, and a compilation provides no assurance. Independence is not required.
Review
We perform inquiry and analytical procedures and report whether we are aware of any material modifications the statements need. A review provides limited assurance, not the reasonable assurance of an audit, and it requires independence from you.
Which level do I need?
The one the requester asks for. Banks and sureties set their own requirements, and the decision about your statements is theirs. Their written request tells us four things: the level, the basis of accounting (cash, tax, or GAAP), the period, and whether a work-in-progress schedule has to go with the statements. We confirm the level at intake. For lenders: what the request should name. Send the request, last year’s statements and any report, and your current books through the portal, never by email.
For contractors
The WIP schedule we maintain from your books can accompany the statements as supplementary information. See construction.
When we also keep your books.
We can still prepare or compile your statements, and a compilation report discloses that our independence is impaired. A review requires independence, so it may not be available from this firm; we say so at intake.
What owners ask about financial statements.
What is the difference between preparation, compilation, and review?
A preparation engagement produces financial statements with no report; each page says no assurance is provided. A compilation adds a compilation report from the firm; we are not required to verify the information you provide, and it provides no assurance. A review adds inquiry and analytical procedures and provides limited assurance that no material modifications are needed. None of the three is an audit.
Can you prepare statements if I keep my own books?
Yes. Preparation, compilation, and review all work from your books, whoever keeps them. If the books are behind or miscoded, catching them up comes first, and that is bookkeeping work scoped on its own.
Do you do audits?
No. When a surety, bank, or agreement requires audited statements, that work goes to a separate firm. We can prepare the financial statements and schedules it starts from.
Can you review my statements if you also keep my books?
A review requires independence from you, and keeping your books or preparing your statements can impair it. When that is the case, we tell you at intake, before anything is engaged. Preparation and compilation do not require independence; a compilation report states that our independence is impaired.
How are financial statements priced?
To scope, once we see the request and the condition of the books. The level, the basis of accounting, the number of entities, and any supplementary schedules such as a WIP schedule all move the work. The consult intake is where that starts.